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Company Formation in Indonesia
Foreign companies that want to set up operations in Indonesia are allowed to establish either of two business entities:
- foreign investment limited liability company (in Indonesian: Perseroan Terbatas Penanaman Modal Asing or PT PMA company); or
- representative office (in Indonesian: Kantor Perwakilan Perusahaan Asing or KPPA)
Under the Indonesian Investment Law, foreign investors that wish to engage in profit-generating business activities in Indonesia can set up a PT PMA company – a fully-incorporated business entity through which a foreign investor, company or government body can generate revenue and profit in Indonesia by performing qualifying activities that are permitted by Indonesian laws.
For foreign companies that only want to conduct non-income generating activities to promote their services, engage in market feasibility studies or establish a local contact office of their parent company abroad, they are allowed to set up a representative office (RO) or KPPA. It has no legal status and is restricted to carry out business activities that generate revenue and profit (an exception is an RO engaged in public works).
As a local representative of a foreign company that has been incorporated in a country other than Indonesia, an RO is no longer required to undergo the company incorporation process. It is, however, required to acquire a license to be able to operate in Indonesia. This license generally lasts for 3 years and can be extended twice, each for a period of 1 year.
How to Incorporate a PT PMA Company in Indonesia: Eligibility Requirements and Steps in Incorporation Process
Foreign investors that want to engage in profit-generating business activities in Indonesia can establish a PT PMA company, a business entity that can be either fully or partially foreign-owned.
Foreign investors can fully participate in business activities that are wholly open for foreign investment and not listed in the Negative Investment List (abbreviated in Indonesian as DNI). The DNI contains a list of businesses that are either: (a) closed for foreign investment or (b) open for foreign investment up to a certain percentage.
- a minimum capital requirement of IDR10 billion or US$800,000.00 (from which at least 25% should be provided as minimum paid-up capital)
- minimum of 2 shareholders (corporate or individual)
- minimum of 1 local director
- minimum of 1 commissioner (can be a foreign citizen, but if s/he does not have a work permit [abbreviated in Indonesian as KITAS] yet, a local candidate has to be appointed to represent the company during the incorporation process)
Steps in Incorporation Process
- Reserve company name and obtain incorporation documents from the Ministry of Law and Human Rights (from which statutory documents must be duly legalized by a public notary)
- Pay registration fee to the Trade Register and obtain receipt
- File notarized incorporation documents with the Ministry of Law and Human Rights for approval
- Apply for business license with relevant ministry or government authority
- Register as employer with the Ministry of Manpower in Indonesia
- Register for social security and purposes and obtain tax and VAT numbers
How to Register a Representative Office in Indonesia: Documentary Requirements and Steps in Registration Process
As a non-income generating entity, an RO has no capital requirement and takes lesser time to be established compared to a PT PMA company. Under Article 2 of BKPM Regulation No. 22/2011, an RO is restricted to:
a. search for income from sources inside Indonesia, including carrying out activities or doing anything related to the engagement in and/or sales and purchases of goods or services with a company or individual inside Indonesia; and/or
b. participate in any form in the management of a company, subsidiary or branch office in Indonesia
An RO needs to be located in an office building in a provincial capital city in Indonesia. It cannot be located in a residential house, apartment or virtual office.
Additionally, the parent company from abroad needs to appoint an RO Head (otherwise known as Chief Representative Officer or Chief Representative). There is no nationality restriction for this position, it can be filled by a foreign national or an Indonesian citizen.
- Letter of Appointment from parent company abroad
- Articles of Association of parent company (duly legalized by a public notary and relevant embassy and includes amendment(s) in English)
- Copy of valid passport of foreign national proposed as RO Head or copy of identification card number and tax number of Indonesian national proposed as RO Head
- Copy of Registration at Chamber of Commerce of parent company
- Power of Attorney to sign the application (if being represented by another party)
- Letter of Intent (duly legalized by a public notary and relevant embassy)
- Letter of Statement from the RO Head stating that they are committed to stay and only work in the position as RO Head without conducting other business in Indonesia
Steps in Registration Process
- Submit documentary requirements to BKPM to obtain an RO license (abbreviated in Indonesian as KPPA license)
- Submit a Certificate of Company Domicile to the Village Office where the RO will be located
- Register RO as a taxpayer with the Tax Office to obtain a Tax Registration Number (abbreviated in Indonesian as NPWP) and a Certificate of Registration (abbreviated in Indonesian as SKT)
- Register with the Regional Government through the Investment and One Stop Services (abbreviated in Indonesian as DPMPTSP) of the Mayor/Regency Office where the RO will be located to obtain a Company Registration Certificate (abbreviated in Indonesian as TDP)
How Cekindo Can Help
If you are looking for a team to help you set up a PT PMA company or representative office in Indonesia, our Indonesian consulting firm, Cekindo, will assist you. Cekindo is the leading provider of professional corporate solutions for businesses in Indonesia and delivers a one-stop service for foreign investors looking to establish operations or expand their business presence in the Asia-Pacific region.